Despite reporting headline losses of R122 million (35.9c per share) on Group R859 million revenue in the six months to February 28, 2022, Ayo Technology announced an interim dividend of 35c per share.
The interim dividend totals R120.4 million but the R223.7 million (65c per share) dividend is higher than the half-yearly dividend declared in 2021.
In total, Ayo declared a total dividend of R326.9 million in the last fiscal year.
Since being listed in 2018 and with this interim announcement (to be paid on June 14), Ayo will pay a total dividend of R950 million.
It defended the large dividend declared in 2021 (65c intermediate and 30c final), telling Moneyweb that “Ayo has an established track record of paying dividends and has decided to maintain its dividend despite a challenging trading environment”.
It continued: “While committed to its listing approach, the group maintains a significant cash balance and returns this cash to some shareholders. . ”
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Ownership and Debate
Its 2021 annual report reveals that Ayo 1 has 133 individual shareholders who own 12 million shares, or just 3.5% of the group.
In 2017, Public Investment Corporation (PIC) controversially invested R4.3 billion for a 29% stake in a technology solution firm affiliated with Iqbal Survey.
Survey’s family holding company, Secunjalo Investment Holdings, has a majority stake in JSE-listed African Equity Empowerment Investments (AEEI) resulting in Ayo holding 49.36%.
This means that Sekunjlo has indirect control over Ayo.
PIC and the Government Employees Pension Fund (GEPF) issued a summons to Ayo in May 2019 seeking a declaration that the subscription agreement signed by PIC with Ayo would be declared illegal and set aside.
The summons further requested that “IOC be directed to pay PIC R4 290 654 165 with 10.25% interest per annum from 22nd December 2017 till the date of final payment”.
Ayo has instructed his attorneys to oppose the move, saying “the matter is currently under investigation.”
Regarding its finances, Ayo says: “If PIC and GEPF succeed in their court application, management believes they will be able to restructure the company into a pure investment holding company. Ayo has several subsidiaries that have existed for over 20 years, which Provides both satisfactory business performance and dividend income for Iowa. ”
Last year, Ayo received R1.848 million in dividends from its affiliates. In the six months to February 28, 2022, it received R3.129 million in dividend revenue from these units.
Ayo further noted in its 2021 Annual Report that: “We continue to erode the quality of our hard work to create a harmonious relationship and disrespect for our brand with our stakeholders during the MPT Commission of Inquiry into PIC investigations.”
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Ayo had earlier objected to the description of his cash balance as “PIC money”. But without the government pension manager’s R4.3 billion investment, Ayo is unlikely to have billions in cash.
Last year, the group earned R164 million in interest. Of this, R96 million was from its cash balance, without which its pre-tax losses of R200.5 million would have been 50% higher.
It has earned R36.7 million in cash interest income in the last six months. Ayo highlighted that “there was a significant reduction in the rate of prime overdraft, resulting in a significant reduction in the interest rates received by the group for its cash holdings”.
Its pre-tax losses were R85 million.
It states that in previous years “the group earned an average of 3.5% per annum from its cash holdings”.
“The group has invested in the stock market to get higher returns on cash holdings. The group has earned a dividend of R3 million and a fair value of R19 million from its current investment in the stock market under review. ”
Its financial statements show that a total of R207.9 million has been invested with Vunani Securities. Ayo adds that “the decline in overall interest and investment income is mainly due to the decline in the overall cash balance”.
The results show a bank balance of R1.513 billion from the half-year to the end of February.
In six months, it burned R650.2 million in cash (from a balance of R2.16 billion at the beginning of September).
In the last full fiscal year (2021), it burned through R1.06 billion in cash.
The PIC indicated in December that Ayo’s dividend payment would be “subject to legal review”.